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In: Accounting

Cameron Inc. paid $4,500 for one year insurance effective July 1. The general ledger account effects...

Cameron Inc. paid $4,500 for one year insurance effective July 1. The general ledger account effects are:

Insurance Payable is recorded as a debit and Cash is recorded as a credit

Prepaid Insurance is recorded as a credit and Cash is recorded as a debit

Insurance Expense is recorded as a debit and Cash is recorded as a credit

Prepaid Insurance is recorded as a debit and Cash is recorded as a credit

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Expert Solution

Answer is d). Prepaid Insurance is recorded as a debit and Cash is recorded as a credit.

When the payment of expense is made in advance for a particular period, it is an asset and hence prepaid account is debited while payment is made, cash is to be credited. Here payment of insurance is done of Jule 1, we debit the prepaid insurance account and credit the cash account and adjusting entry for recording of expense and reducing the prepaid amount is to be recorded at year end.

ekkarill92 answered 1 year ago
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